Philanthropy in arts and culture

In the face of increasing financial pressure, and with recent government announcements on encouraging greater giving within society, more arts and culture organisations are beginning to explore whether philanthropy could be a source of additional funding. This briefing looks at the potential of philanthropy within arts and culture, the issues boroughs and other organisations will need to consider when looking at this approach, and draws members’ attention to some match funding deadlines.

Introduction

Given the strain on public finances, philanthropy is one way of raising additional income - not to replace existing funding, but to allow for a more enhanced cultural offer to be delivered than would be the case if solely reliant on the state.

The government has recently introduced a range of proposals on how to increase donations of time and money in the Giving white paper, published in May this year. Alongside initiatives designed to encourage everyday giving of smaller amounts, the white paper also introduces initiatives and ideas that focus on major philanthropists, recognising a different approach is needed for the different sectors.

The potential for philanthropic funding

Currently, the arts and culture sector in England is funded through a mixed economy model, with income coming from public investment, earned income and private sector funding. Its lack of dependence on solely public money (a feature of the continental system) or on philanthropic and corporate giving (as seen in the US) is seen as one of its main strengths. The government’s view is that creating an even more mixed funding model, less reliant on any one form of funding, will result in increased financial stability and certainty for arts organisations.

Recent announcements have looked at increasing levels of philanthropic giving. The Secretary of State for Culture, Jeremy Hunt, announced his 10 point plan for cultural philanthropy in December 2010. It aims to catalyse and facilitate individual and corporate giving and encourage increased levels of philanthropy by:

- establishing more visible public recognition for philanthropy, possibly through greater recognition in the honours system
- developing fundraising skills and capacity across the cultural sector
- strengthening links between culture and other sectors supported through philanthropy.

Alongside the plan was the announcement of a £100 million match funding scheme to boost philanthropy to the arts, with investment from Arts Council England, the Department for Culture, Media and Sport (DCMS) and the Heritage Lottery Fund. The scheme is made up of a number of different initiatives(^2), including:

- **Catalyst Arts: capacity building and match funding scheme** – a £30 million fund to increase the fundraising potential of arts organisations. The scheme will support organisations in building their fundraising capacity and capability over a three-year period, awarding grants of between £120,000 and £240,000. The application process is now open, with a deadline of 31 January 2012.

- The **Catalyst Endowment scheme** – a £55 million scheme to help arts and heritage organisations secure long-term financial stability by building endowment funds. Organisations can bid for grants to support endowment fundraising, to be matched by private donations. The fund is now open to applications, with a deadline of 16 January 2012.

- The **Catalyst Arts and Catalyst Heritage fundraising capacity building grants** is an open access grant scheme aimed at arts and heritage organisations with little or no fundraising experience. Grants of between £15,000 and £25,000 will be awarded to organisations for the purpose of building fundraising capacity and capability. This scheme will open to applications on 1 April 2012.

### Analysis

**The use of philanthropy in public services**

In the UK, local government has in the past undertaken very little large scale fundraising to support public services. This differs to the approach taken in North America, where philanthropy has long been a part of the fabric of public service institutions. Figures show that cultural giving per capita in the US stands at £37 a year, compared to the UK figure of just £6(^1). However, this is in a country with a culture of low taxes and a small state.

One example of where this is changing is in Birmingham. Here the city council has established the **Library of Birmingham Development Trust**, an independent charity which aims to raise funds that will complement the city council’s investment in the new city library. This approach has allowed for the development of an £189 million cutting edge, landmark library to be built and open by 2013. The trust has generated additional funding through philanthropists to deliver an enhanced product.

**How can London boroughs be involved?**

Encouraging philanthropic giving could be an opportunity that the London boroughs may want to explore, but there are considerations that need to be taken into account to see whether this approach is worthwhile for boroughs to pursue.

In London, the issue of size may be a factor. London boroughs acting individually may not be as successful on their own as if they join together. For example, the Birmingham Library development is an iconic development that will serve the whole city.

Boroughs may also consider how they can support their local arts and community sector organisations to explore the potential of philanthropic giving. One type of philanthropy is encouraging the use of endowments. Arts Council England and the British Museum have produced reports on the potential of endowments within the arts sector for DCMS.

**Endowments** are cash or other assets donated to a charity where the conditions of the donor require the asset to be held or invested to generate income. The large American institutions, such as the Metropolitan Museum of Art, have huge endowment funds, funding a substantial

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(^1) Keynote speech by Jeremy Hunt, Secretary of State for Culture, 8 December 2010

(^2) Further details on these schemes and the application process can be found at: www.catalyst-artsandheritage.org.uk proportion of the organisation’s capital structure. In the English arts sector, endowments are much less common, less than 5 per cent of organisations reported holding them in 2009/10. However, there are examples of where endowment funds have been built up in English arts organisations, and are used to fund a variety of activities, not just core running costs. The Spitalfields Music example (see case study below) highlights how smaller organisations can benefit from endowments, and how they can be used in creative ways. Thinking creatively about how endowments can be used is a useful way to explore their potential locally. Both Arts Council England and the British Museum reports identify a number of success factors when considering the use of endowments.

Success factors

- **Knowing how to ask for private funds** - the ‘ask’ of an organisation needs to match its mission, needs and ambition, along with meeting the interests of potential donors. Organisations need the right capacity and professionalism to do so properly. There is good practice within the arts sector, but this needs to be shared more.

- **Expertise to successfully manage endowments and sources of private income** - the Dulwich Picture Gallery (see case study below) provides an example of where having the right skills from staff is essential. The building up of endowments takes time and relies on an experienced professional fundraising team.

- **Fundraising is a priority of the whole organisation** – with all key staff devoting time to this for it to be successful

Other success factors include:

- a focus on building relationships
- packaging products to suit different audiences
- a need to be passionate about the arts and the activity undertaken.

Arts organisations and boroughs will face competition from others within the sector, and other charitable organisations when seeking philanthropic giving. Celebrating and promoting community and education focussed work that demonstrates the wider benefits the arts can provide to society will be crucial. Last year cultural organisations raised £655 million from private sector supporters. While this is a significant sum, overall the arts receive less than 3 per cent of all charitable giving. Social responsibility and altruism are seen as key drivers for donors, so this element should be promoted.

**Case studies**

**Spitalfields Music** provides an example of the creative use of endowments, and proves that relatively small arts organisations can successfully build endowments. The endowment it holds is proportionate to the size of the organisation and has been carefully managed. Turnover in 2009 was just over £500,000. In the same year, the endowment was valued at £150,000 and has, since 2003, provided between £5,000 and £15,000 annually for festivals and for leveraging further income for new commissions.

**The Dulwich Picture Gallery** endowment was valued at around £11 million in 2009, a sum almost unique in the English arts sector. The gallery receives no public subsidy, so income comes from private giving alongside earned income such as shop sales and admission charges. The organisation has prioritised fundraising to ensure it is successful, restructuring and expanding its capacity and skills base in line with the organisation’s needs and ambitions. The success is partly down to the high profile chairs and trustees, who have led the fundraising efforts, having the energy, vision and, crucially, the financial expertise, to engage with the gallery’s fund managers. Fundraising is also a priority throughout the organisation, with senior staff dedicating a significant amount of their time to fundraising.

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3 Endowments in the Arts (Arts Council England) 2010 4 Keynote speech by Jeremy Hunt, Secretary of State for Culture, 8 December 2010 Commentary

There has been much discussion about whether increasing philanthropic giving is an effective, long term funding approach within the arts and culture sector. For the greatest impact, the sector needs to develop skills and capacity for fundraising and managing funds. National government also has a role to play in creating incentives to encourage philanthropic giving in the arts – for example, through tax breaks.

For London boroughs, the example provided by Birmingham shows that it is possible to generate private giving to support a public sector project. There is a range of considerations to explore, as noted above, including the potential of acting as individual boroughs, or whether to join together.

Overall, research indicates that, for this approach to prove successful, it needs to be supported by entire organisations. Both members and officers will need to be fully supportive of the use of philanthropic giving to provide additional funding for public services. Without this, the role of philanthropic giving within the public sector will be significantly limited.

The current focus from government on the potential of philanthropic giving within the arts and culture sector provides a platform for boroughs to build on, exploring the potential of this within local organisations and looking at how they can work together to capitalise on this momentum.

Author: Nicola Lowis, policy and project officer (T: 020 7934 9916) Click here to send a comment or query to the author

Links: The Giving white paper (Cabinet Office) Endowments in the Arts (Arts Council England) MacGregor report on the role endowments could play in DCMS funded museums and galleries

This member briefing has been circulated to: Portfolio holders and those members who requested policy briefings in the following categories: Culture, sport, tourism and 2012